Value of Subjective Assessment for Organisations

By Russell Thomson | November 29, 2010

It was Senator Robert Kennedy who, in 1968, commented that there is more to life than GDP. He was correct. You just have to consider how the UK’s long-term growth in GDP has impacted upon our existing measure of national well-being . The fact of the matter is that, for the greater part, it hasn’t. Data from the UK’s Office for National Statistics suggests that what is known as the ‘Easterlin paradox’ kicked-in a long time ago.

In 1974, Richard Easterlin, Professor of Economics at the University of Southern California, concluded from both GDP statistics and subjective ‘well-being data’ collected in earlier years from a number of nation-states, that once a certain level of GDP is achieved, the relevance of GDP growth as an indicator of enhanced national well-being declines markedly. Thus, after basic needs are met, nations that get richer don’t necessarily become happier. In fact, he concluded that the positive change in aspiration which occurs as a result of GDP growth may actually limit the potential of nation states to achieve enhanced levels of happiness.

 Since Easterlin reached his conclusion, there have been a number of claims to the contrary, which serve to widen this useful debate on the value and appropriateness of subjective research. And, of course, there will always be those who will argue to the bitter end that any attempts by researchers to have society ‘self-anchor’ a subjective measure of something as obscure as ‘happiness’ will inevitably deliver an inconclusive result.

 All very logical, and difficult to disagree with. And yet……… we all know, in our hearts, that Kennedy was right. GDP doesn’t tell the whole story. So, what does?

 Societal well-being has hit the UK headlines recently because our Prime Minister, David Cameron, has openly supported the investment of taxpayers’ money to investigate the meaning of well-being. Hardly a priority in these straightened economic times, you’d think. So the chat rooms are abuzz with the scepticism and negativity of those desperate to grab the moral high ground on behalf of the thousands of public sector workers who are about to lose their jobs, and the countless others who are suffering in myriad ways as a result of the recession. All perfectly understandable if your aim is to undermine a new approach or score a political point.

And yet Cameron is right to proceed. Why? Well, if the banking crisis and global economic recession has taught us anything, it is that our traditional approach to balancing the books(or even understanding what ‘the books’ are telling us) does not make clear everything that we need to know. As social groups, whether in the home, in the office, as a community or as a nation, our over-reliance upon traditional numbers-based assessments of performance means that we are singularly failing to balance tangibles and intangibles or even know how to interpret nuance.

 Consider the litigious, rule-based, target-driven and compensation-seeking culture which has taken hold of our society in the past 2 decades.  Beggar thy neighbour. In short, there is something missing in the way in which we define what success looks like and determine whether we are being successful, beyond the strictures of the balance sheet. Yet nuance and interpretation can provide such insight.

It is to Cameron’s credit that he has brushed off the attacks on his happiness initiative, telling his detractors that ‘if you believe in something, you just have to get on and do it’. It would be all too easy to cave-in to the naysayers, but Cameron senses, albeit belatedly, that Kennedy was on to something. Well-being can say just as much about the state of the nation as GDP. As economies and societies evolve, seeking new techniques to measure the subjective is no bad thing, offering the potential to enlighten us far more than relying entirely upon traditional measures.  

And Kennedy’s argument that there is more to life than GDP translates well within the business, firm or corporate environment. In fact, for the people-led business, it represents a crucial, yet sadly under-developed attitude of corporate mind. Revenue growth and the profit imperative continue to be immensely important to the economic success of any business. But are we missing an opportunity to further investigate, understand and manage the intangible nature of business success? It is this very thought which underpins the thinking behind the study of organisational personality, to which this blog is mostly dedicated.

By understanding intangibles and striving to measure subjective feedback, we have much to discover about the demeanour of our people and the potential of our organisations to succeed in the future. It is these important aspects of organisational character which traditional balance sheets can never hope to reflect or represent.

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